Under its Red Pin One plan, clients agree to sell and buy with same Red Pin agent and in return, that agent collects no commission on the sale of the home, but a full 2.5 per cent commission on the subsequent purchase. Clients must still pay 2.5 per cent commission to the cooperating agent during the sale transaction.
The Red Pin Brokerage, which ruffled industry feathers with its launch as a largely online business model, is betting on the fact that consumers, when choosing between similar listing options, will select the agent who charges the least. That kind of tactic has pushed commission rates lower and lower as agents continue to compete for an ever-shrinking supply of property listings in Toronto, Vancouver and other hot markets.
Such practices, including slashed commission rates and rebate programs, could affect all agents, should they become common enough in practice. Although most industry veterans are sanguine in the face of that threat.
“This will spread amongst the weak and in time affect all of us,” writes agent Kevin Andrew in the REP
forum, in response to a story about rebate programs. “Try coming up with professional innovative marketing that buyers and sellers see the value in rather than giving away commission to compete with your colleagues.”
Tarik Gidamy, co-founder and broker of record for The Red Pin, who says he saw agents increasingly drop their commissions to 1.5 per cent or even less in an effort to win more listings, says that’s the very trend that led to the creation of The Red Pin One, the title of this new program.
“It’s a marketing expense,” Gidamy says, pointing to the fact that, technically, an agent would be surrendering half of his or her commission. “It’s something most agents, as individuals, wouldn’t be able to do.”
The program is likely to anger a lot of traditional agents, but Gidamy says other agents need to get on board with the changing times.
“We don’t answer to the industry, we answer to our clients and to how we’re conducting ourselves,” he says. “This is the natural course of where things are headed.”
Have your say: Are lower commissions the way of the future?
One Toronto brokerage has announced a program that could threaten industry standards around commissions at the same time it aims to save a specific type of client about half of their selling costs.